World Bank Treasury webinarpubdocs.worldbank.org/...countrycaseofportugal-fernandocrespodiu-… · Involvement throughout all stages of project lifecycle A close partner of all line

U T A P Unidade Técnica de Acompanhamento de Projetos

Managing Fiscal Risks from PPP: Country case of Portugal

World Bank Treasury webinar

April 12th, 2017

U T A P Contents

2

1) UTAP in brief

2) The development of the Portuguese PPP portfolio

3) 2011 sector crisis and 2012 legal and institutional reform

4) Fiscal risk management tools: lifecycle perspective

5) Lessons learned


U T A P Contents

3

1) UTAP in brief




5) Lessons learned


U T A P UTAP in brief

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The Ministry of Finance technical support unit for PPP projects

A result of the Economic and Financial Support agreement signed by Portugal in 2011 with IMF, EC and ECB

Established by the 2012 legislation (Decree-Law 111/2012) as part of a comprehensive PPP sector reform

Fully operational since January 2013

Currently 11 full time technical staff (a maximum of 13)

Involvement throughout all stages of project lifecycle

A close partner of all line ministries with PPP contracts: infrastructures, healthcare, home affairs and environment

Provides technical support in other large scale projects implemented under other public procurement figures


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The Ministry of Finance technical support unit for PPP projects

Responsibilities:

o Project appraisal, structuring and tendering

o Reporting system on PPP and concessions

o Oversee of PPP contracts on behalf of the Ministry of Finance

o Contract renegotiation

o Legal and financial technical support to the Ministry of Finance and other ministries and public institutions

o Budget process support

o PPP know-how management

o External representation of Portugal

UTAP in brief


U T A P Contents

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1) UTAP in brief




5) Lessons learned


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Evolution of PPP contracts signed: motorways (M), health care services (Hs), health care infrastructure (Hi), railways (R) and security (S)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

M

M

M

M

M

M R

M M M M

Hs

M

S

M

Hs M

M Hs M

R

M

M

M M

M

M

M

Hs

Hi

M

M

M

M

Hs

Hi

Hs

Hi

M

Hs

Hi

PPP portfolio


U T A P PPP portfolio

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UTAP’s mandate: Central Government PPP

32 contracts in 4 sectors

Cumulative investment of 14.505 million € (December 2015 data)

Cumulative investment Portfolio composition

21

8

2 1

0

5

10

15

20

25

Rodoviárias Saúde Ferroviárias Segurança

Rodoviárias

Saúde

Ferroviárias

Segurança

Motorways

Health

Railways

Security

Motorways Health Railways Security

13.525; 93%

460; 3%

407; 3%

113; 1%

Source: UTAP


U T A P PPP portfolio

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Central Government PPP expenses

Total lifecycle net expenses forecast (32 contracts): 13.400 million €

Source: UTAP

1.0

67

97

2

1.54

4

1.5

22

1.58

0

1.46

4

1.42

1

1.23

9

1.15

6

1.0

36

903

75

2

68

6

47

8

445

336

26

7

225

158

23

5

193

151

14

9

119

139

135

141

-20

-22 3

-200

0

200

400

600

800

1.000

1.200

1.400

1.600

1.800

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

20

36

20

37

20

38

20

39

20

40

20

41

Central Government PPP net expenses (million €)


U T A P Contents

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1) UTAP in brief




5) Lessons learned


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2011 debt crisis – strong fiscal sustainability concerns about PPP

2012 State budget – PPP sector “do nothing” fiscal scenario seen as unsustainable from a contract lifecycle perspective

2011 crisis and 2012 reform

Motorways

Railways

Health sector

Security

Mill

ion

Eu

ros

Source: UTAP, from 2012 State Budget data


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2012 State budget – PPP sector “do nothing” fiscal scenario seen as unsustainable from a contract lifecycle perspective


Motorways

Railways

Health sector

Security

Mill

ion

Eu

ros

2015 gross fiscal commitment ≈ 2.100 million ≈ 1,5% of GDP

Total outstanding gross payments ≈ 37.000 million €

Source: UTAP, from 2012 State Budget data


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Moreover, the State budget figures include only signed PPP contracts with firm financial commitments, and there was a very substantial pipeline of new PPP:

o 4 road PPP tenders under preparation

o 20 road PPP under consideration, in different phases of appraisal, planning and structuring

o The new Lisbon airport: structuring was underway

o The new high speed railway (HSR) network: over 500 km divided into 6 PPP, 1 under construction, 1 tender launched

o The new Lisbon hospital tender launched and underway, plus 3 additional PPP hospitals (all 4 infrastructure contracts)



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Strong political and public opinion debate around PPP

Planning, project selection, public accounting and budgeting for PPP not transparent

Unclear “bill” of projects in the pipeline (new motorways, HSR and new airport) and strong concerns about financial/fiscal sustainability

A clear problem regarding “adverse selection” of projects:

o Projects developed with high optimism bias

o Lack of a centralized public body or standardized procedure for cross-section project selection

o Large volumes of “cheap money” from banks available for project finance infrastructure operations – a matter of “bankable” versus “good projects”?



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2012 Ministry of Finance + IMF public sector audit regarding PPP sector

Lack of coordinated and centralized public action, even within the MoF

Asymmetry of information, resources and technical capacity – underdimensioned and/or poorly prepared public teams

Excessive resource to external advisers and low capacity to accumulate experience by the public sector

Deficit of quality in some key methodologies – CBA, PSC, VfM…

Poor contract management by line ministries – insufficient resources

The role of “gatekeeper” by the Minister of Finance was ineffective, due to technical and political reasons

Poor control of fiscal risks and contingent liabilities – frequent unilateral acts by public partners, increasing litigation and fiscal uncertainty


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Legal and institutional PPP framework reform launched in 2012

Regain control over the fiscal outcome of PPP, both concerning known and contingent liabilities

Reinforce the role of the MoF, evolving from a “gatekeeping role” to active participation throughout project lifecycle

Create inside the MoF a professional and stable structure, specialized in PPP financial and legal affairs – centralize action and ensure the know-how and technical capacity are created (and stay)

Apply more rigorous technical methodologies and criteria in structuring and launching PPP projects – CBA, VfM, PSC

Enhance transparency along project lifecycle – public disclosure

Improve the fiscal control and reporting system – public disclosure


U T A P Contents

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1) UTAP in brief




5) Lessons learned


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Fiscal risk management tools

Decree-Law 111/2012 – key features introduced by the reform

Institutional perspective:

o Creation of UTAP, as the “long arm” of the MoF, with a lifecycle approach to fiscal risk management

Fiscal control measures during structuring and tendering phases:

o Compulsory project affordability and fiscal impact studies

o Sensitivity analysis on fiscal performance of projects – regarding project and macroeconomic variables

o Detailed description of expected project outputs

o Issue a detailed risk matrix – public/private risk allocation and expected fiscal impact, including mitigation strategies for risk retained by the public sector


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Decree-Law 111/2012 – key features introduced by the reform

Fiscal control measures during execution and contract management:

o Minimization of unilateral decisions by public partners

o Ex-ante determination of fiscal impacts and affordability of unilateral measures

o Fiscal impact assessment of contract renegotiations as well as change in the original risk matrix

Transparency and information disclosure:

o Compulsory disclosure of (i) PPP contracts and annexes, (ii) annual and quarterly reports on financial and fiscal impact of PPP, (iii) any relevant legislation and appointment of task teams, and (iv) tender documents – UTAP’s own website


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DL 111/2012 PPP regime arrangements PPP project proposal Preliminary studies Reasoned PPP proposal

“Project team” Strategic studies Cost-Benefit Analysis (CBA) Value for Money analysis, PSC Fiscal affordability analysis Tender documents

preparation Draft legal documents

Work developed by line ministry teams

“Tender jury” Evaluation of bids Shortlist of bidders Negotiation phase Award proposal to ministries

Contract management Budget and fiscal follow-up

MoF leadership: 3 UTAP 2 line ministry


MoF leadership: UTAP

DL 86/2003 PPP regime arrangements

PPP project proposal + structure Preliminary studies Strategic studies Cost-Benefit Analysis (CBA) Tender documents


“Follow-up commission” Analyze and further develop

previous documents/studies Value for Money analysis, PSC

“Tender commission” Evaluation of bids Shortlist of bidders Negotiation phase Award proposal to ministries


Parity of ministries: 1 President 2 line ministry 2 MoF

MoF leadership: Parpública, SGPS DGTF





U T A P

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Project structuring and appraisal: leadership assumed

by the MoF through UTAP


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Leadership assumed by MoF through UTAP along the

project lifecycle


U T A P Contents

23

1) UTAP in brief




5) Lessons learned


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Lessons learned

MoF role as gatekeeper is ineffective – technical and political reasons

Thorough involvement of the Ministry of Finance required along the lifecycle (“end-to-end”) – resident PPP unit strongly recommended

Sound fiscal management starts with sound project selection – cross-sector planning, project appraisal (CBA), risk allocation…

Need for solid multiannual fiscal planning and accounting procedures

Transparency and disclosure of information, reporting system – prevent and manage fiscal, political and public opinion related risks

Adequate contract management is a key factor for success at different levels – need to reinforce public teams in this area

“Stick to the plan” – avoid unilateral actions by the public sector, thus reducing fiscal risks and contingent liabilities


U T A P

Estruturação de Projetos de PPP 25

Ministério das Finanças

Rua Braamcamp, 90 – 6º piso

1250-052 Lisboa

Web: www.utap.pt

Fernando Crespo Diu – Director

E-mail: [email protected]

Phone: +351 211 119 711

U T A P Unidade Técnica de Acompanhamento de Projetos

http://www.utap.pt/

mailto:[email protected]

World Bank Treasury webinarpubdocs.worldbank.org/...countrycaseofportugal-fernandocrespodiu-… · Involvement throughout all stages of project lifecycle A close partner of all line

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